Convenience Store Decisions, August 2017

CStoreDecisions ecisions com CATEGORYMANAGERS NOTEBOOK THE U S CIGARS AND CIGARILLOS CATEGORY REMAINED HIGHLY CONCENTRATED IN 2016 WITH THE LEADING FOUR PLAYERS TOGETHER ACCOUNTING FOR A 78 SHARE OF VOLUME SALES ERIC PENICKA RESEARCH ANALYST EUROMONITOR INTERNATIONAL industry is allowing government to determine their fate in a product and business they created is crazy Tax hikes certainly impact sales of course but not necessarily permanently Here in Utah were kind of behind on the tax scene said Randy Needs director of marketing for Holiday Oil Co based in Salt Lake City About ve years ago we were not really taxing our customers The state wasnt given that revenue that other states were getting so they kind of stepped up to the market The rise of Utahs tax rate which Needs characterized as gradual seriously hurt cigarette sales for about a year he continued They have gone up but not anything large But customers kind of became numb to it and growth came back and I think the same thing happens with cigars and now with e cigarettes Everybody kind of gets numb to it and they go back to their normal way The rst and most direct step a retailer can take is to ght against any ban or tax increase This can be accomplished using their state retail association and by sending letters to their representatives Hawatmeh is convinced that a petition should go out with the signature of every employee manager and owner in the industry It would have millions of names sent to the regulatory agencies and White House It would show that we the people have spoken More conventional steps of course should also be taken A retailer in proximity to a market without these types of bans or taxes needs to create a point of difference to encourage consumers to shop at their stores Increasing and advertising a large assortment or manufacturer specials will also improve the perception that the retailer is a destination for cigar purchases Another strategy is investing in or advertising a beer cave or a pizza program which can attract customers who are more likely to also purchase cigars Some retailers can also promote their cigars bundling them with another purchase in many cases Eventually said a top industry executive this practice along with other promotions will likely be banned by the U S Food and Drug Administration as has already occurred in some instances PACKS AND PROMOTIONS Holiday Oil which operates 56 convenience stores throughout Utah ultimately decided to go with a cigar set consisting of three brands Altrias Black Mild Swisher and Prime Time Each offers a strong promotional program Prime Time has single stick shippers little countertop units for cigars priced at 59 cents per stick Theyve got four avors and we purchase and promote those pretty regularly At the same time he continued Swisher has put a major emphasis on the two pack foils supported once again by a promotional strategy We buy into some of those counter top two pack promotions said Needs Thats where Swisher is going not the singles but really driving more of the two packs and so there is great growth there Of course it is a different cigar than Prime Time Needs reported that Black Mild is easing up on its emphasis on the 99 cent price point For a good year they were promoting 99 cents and of course they were introducing a bunch of seasonal avors as well The packaging of cigars is finding a wider consumer acceptance I think thats really the biggest thing manufacturers have spread out into those categories said Needs In our market Prime Time has always been the dominant cigar cigarette product We have seen Swisher and Altria with the Black Mild brand really make a push into that singlestick market That has expanded the business A broadening of the offerings has been just what consumers are looking for Needs continued Obviously there are more varieties Altrias Black Mild cigars have plastic and wood tips so they are a little bit more upscale Swisher Sweets has got some avors that I think a probably a little bit bolder than some of the Prime Times so those things have expanded the market all together We still do well with some of the 10 and 20 packs from Prime Time they have always been stable nothing great But the singles have really proliferated and made that category real interesting All told Holiday is doing well with its cigar set which includes about 60 SKUs Last year saw sales rise by 25 26 said Needs who handles the buying chores for all of Holidays product categories We were probably under categorized in that category going into 2016 But with the extensions of some of those lines from some of those manufacturers we went back in and redid our sets expanded them made them more of a destination store for that product said Needs And we saw some great growth from that CSD 58 Convenience Store Decisions l August 2017

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